Kenneth Allen Barbara Allen v. Commissioner of Internal Revenue

In 1981, Allen contributed $22,500 of borrowed funds, together with $2,500 of his own money, to a charitable organization. He and his wife then claimed the entire $25,000 as a charitable contribution on their 1981 tax return pursuant to section 170(a) of the Internal Revenue Code (Code), 26 U.S.C. § 170 (a). The Commissioner of Internal Revenue (Commissioner) issued a notice of deficiency, denying the Allens’ entire $25,000 deduction and also imposing a negligence penalty under 26 U.S.C. § 6653 . Although the tax court ruled that Allen was entitled to a deduction for the $2,500 contributed from his own funds, it sustained the Commissioner’s disallowance of the borrowed portion and upheld the negligence penalty. The Allens now appeal that ruling. The tax court had jurisdiction pursuant to 26 U.S.C. §§ 6214 and 7442. We have jurisdiction over this timely appeal pursuant to 26 U.S.C. § 7482 . We affirm.

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The transaction we review involved three related organizations. International Business Network (IBN) is a nonprofit organization founded by Bizar, which provides both educational services and political lobbying in support of small business interests. IBN holds tax-exempt status…